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Democratic Control Of Senate Might Mean Lean Times For Contractors

By | November 6, 2006

      If Democrats win control of the Senate in the mid-term election tomorrow, that could be bad news for the defense industry.

      But if Democrats gain control of the House and not the Senate, it might not make that much difference.

      So says Loren Thompson, chief operating officer of the Lexington Institute, a Washington-area think tank. He cited recent research on defense spending trends released by Merrill Lynch in September that was provided by analysts Ron Epstein and Stephanie Hwang.

      “Although Democratic presidents oversaw the biggest military spending surges of the last century, analysts Ron Epstein and Stephanie Hwang found that since 1976 Democratic control of the government has been a powerful predictor of declines in defense outlays,” Thompson noted. “According to their research, 76 [percent] of the rise and fall in defense spending is traceable to which party controls the Senate and the White House.” The analysts found that control of the House didn’t make much difference.

      The outcome of the 2008 presidential election could be critical for the defense industry, according to the analysts. They “predict that the highest level of weapons outlays likely in a Democratic administration would fall below the lowest levels seen in a Republican administration.”

      Epstein and Hwang defined defense spending only as money going to military research and procurement, because they were performing equity research, meaning an examination of factors affecting stock prices.

      Many pollsters and analysts see a far greater likelihood that Democrats will win the House, while capturing control of the Senate is possible but a much longer chance.

      Thompson points to signs of a Democratic surge in the election.

      “[T]here isn’t a single state in the union where a Republican challenger seeking a seat in the House of Representatives is leading a Democratic incumbent in the polls,” he wrote in a paper released a week ago. “On the other hand, about 50 seats currently held by Republicans seem to be in play. It looks like the Democrats will win the House, and maybe the Senate too.”

      The full issue brief paper that is entitled “If Democrats Rise, Will The Defense Sector Fall?” can be viewed in full at on the Web.

      Just which legislators will gain full committee and subcommittee chairmanships if Democrats gain control of either or both Houses of Congress won’t be determined until the new Congress is poised to begin work and Democrats caucus to decide those issues.

      But often, the ranking Democrat on any committee or subcommittee in the current Republican-led Congress would move up to become chairman of the panel in the new Democratic-led Congress.

      For example, that might mean that Sen. Carl Levin (D-Mich.) might be chairman of the Senate Armed Services Committee (SASC), instead of Sen. John McCain (R-Ariz.), if Republicans lose control of the upper house. McCain has criticized The Boeing Co. [BA] harshly on some matters, such as a deal to provide the Air Force with 100 aerial refueling tanker aircraft, a plan that McCain helped to derail.

      A major uncertainty if Democrats seize the Senate is who would chair the SASC airland subcommittee. While Sen. Joseph Lieberman of Connecticut currently is the ranking Democrat on the subcommittee, he lost the Democratic primary election in his bid for another six-year term, prompting him to run in the general election as an Independent, where polls show he enjoys a wide lead over both the Democratic and Republican Senate candidates.

      Lieberman has said if he wins tomorrow, he intends to caucus with Democratic senators. Then the question would be whether they would punish him for opposing the Democratic Senate candidate in Connecticut, or whether they would let bygones be bygones and give him the chairmanship.

      On the Senate Commerce, Science and Transportation Committee, if Democrats were to win control of the Senate, Sen. Daniel K. Inouye of Hawaii, currently the ranking Democrat, would be in line to become chairman. If Republicans retain control, then Sen. Ted Stevens of Alaska would remain chairman of the full committee, and Sen. Kay Bailey Hutchison of Texas would continue chairing the science and space subcommittee.

      In the Senate Appropriations Committee, a Democratic victory could see Sen. Robert C. Byrd of West Virginia become chairman, with Sen. Barbara A. Mikulski of Maryland chairing the commerce, justice and science subcommittee.

      In the House, Democratic control could see Rep. Ike Skelton of Missouri, now the ranking Democrat, become chairman of the House Armed Services Committee (HASC). The current chairman, Rep. Duncan Hunter (R-Calif.), has decided to run for president in the 2008 election campaign.

      In the House Science Committee, which oversees many space and aeronautics programs, the ranking Democrat currently is Rep. Bart Gordon of Tennessee.

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